FUND VIEW - "Socially responsible" funds emerging in Asia
Date: 16-Oct-02
Country: CHINA
Author: Jill Wong
"It's obviously difficult," said Euan Marshall, director of Kingsway Fund Management Ltd in Hong Kong.
"But it is a unique proposition about responsible long-term investment, which goes to the heart of the corporate governance ideas that have really shattered the confidence of the great American economy," he told Reuters.
Corporate governance issues have come into focus in Asia and hit the headlines this year after U.S. pension fund giant Calpers said it was withdrawing money from regional markets that failed to meet its strict criteria for social and ethical investment.
Kingsway is aiming to raise US$50 million for an open-ended Asian fund focused on socially responsible and ethical companies, and will market the fund to institutional and retail investors in Hong Kong, the United States, United Kingdom and Australia.
"We're pitching this as a value driven - but essentially trying to minimise risks - investment proposition," Marshall said.
The Kingsway Socially Responsible Investment Asia Fund will focus on Asian equity markets outside Japan, and will start investing in December 2002.
Socially responsible investment has taken off in the United States, with assets growing five times faster than other funds during the last 30 years, and now estimated at US$2.3 trillion, according to industry data.
This means that one out of every eight dollars that is professionally managed in the United States belongs to a socially responsible portfolio.
Marshall said the figure is still miniscule in Asia with only four fund houses in Hong Kong, including Kingsway, having offered funds that adopt the socially responsible methodology.
"Finding the investor who wants to play to that idea is going to be the challenge for us over the next six months," he said.
"Both Asia, U.S. and Europe has found that SRI funds tend to attract first-time investors," Marshall said. "In Hong Kong, there's only eight percent mutual fund penetration. What about the other 92 percent? Let's see if we can touch that."
COMPELLING CASE
Compared to developed markets, there was an even more compelling case for Asia to develop socially responsible investments, as governments in the region grapple with issues like pollution, human rights and deforestation, he said.
"In Asia, socially responsible investments can actually alter the course of development. In the U.K. or U.S., we're tinkering with the product of development," Marshall said.
"Here, we're building a new factory under the principle of cleaner production. Is there a business case? Of course there is, because if you subscribe to the whole theory of climate change, it means businesses going forward are going to be challenged on their carbon emissions," he added.
Fund managers use the socially responsible approach to screen companies based on a set of social and environmental criteria. On top of that, many also employ filters to select companies with good corporate governance and ethical practices.
Kingsway employs ethical screening techniques on all of its five funds in Hong Kong's Mandatory Provident Fund (MPF) public savings plan and its six unit trusts for sale in the territory.
It screens companies for a set of 23 social and environmental criteria, and excludes companies in the military, nuclear, tobacco and gambling industries, as well as those with animal testing and deforestation practices.
